Nortel Slashes 2,100 Jobs
Nortel Networks Ltd. said it will cut 2,100 jobs and move a further 1,000 positions to lower cost regions, as it reported its full-year 2007 results today. (See Nortel Reports 2007.)
The company said that 70 percent of the job cuts will happen this year. The workforce reduction is designed to result in gross cost savings of $300 million.
Nortel reported full-year 2007 revenue of $10.95 billion, which is down 4 percent compared to 2006. Fourth quarter revenue was $3.2 billion, which was also down 4 percent from $3.32 billion in the fourth quarter of 2006.
Revenue in the carrier networks division was down 9 percent to $1.3 billion in the fourth quarter, compared to the year-ago quarter. But sequentially compared to the third quarter last year, carrier networks revenue was up 25 percent. This division's revenue was affected by the divestiture of Nortel's 3G access business. (See Alcatel Snags Nortel 3G Unit.)
Enterprise solutions revenue in the fourth quarter was down 3 percent to $762 million, compared to the fourth quarter in 2006. The company said that the enterprise division was negatively affected by lower revenues from the LG-Ericsson Co. Ltd. joint venture.
Global services revenue was up 12 percent to $605 million, compared to the fourth quarter in 2006. The company said that this division had strong growth in network implementation services and benefited from the completion of contracts in the quarter.
Metro Ethernet networks revenue in the fourth quarter was $429 million, down 4 percent compared to the same quarter last year. The year-on-year decrease is the result of lower long-haul optical revenue and legacy data.
Nortel's fourth quarter gross margin was 43.7 percent, while operating margin in the fourth quarter was 7.6 percent.
Lehman Brothers analyst Inder Singh described Nortel's results as "mixed."
"Overall, we believe operating margins in EMEA and Enterprise were ahead while total operating margin was limited by slow spending on CDMA equipment at Sprint," writes Singh in a research note.
— Michelle Donegan, European Editor, Light Reading